Best Buy cuts 400 jobs, with more to come

RICHFIELD, Minn. - Best Buy cut 400 jobs at its Richfield headquarters as the electronics giant scrambles to survive in a competitive retail world.

Nearly 10 percent of the jobs were cut from the gleaming corporate campus on Tuesday, and the company warned of more cuts in 2013.

"This $150 million reduction, executed today, represents the first phase of this (Renew Blue) initiative, with additional reductions to come during the year," Best Buy said in a statement.

Dave Brennan, a retail specialist at the University of St. Thomas in St. Paul, said the layoffs were inevitable after Best Buy failed to boost its sales and profits -- and faced new threats from low-cost competitors online.

The Best Buy corporate headquarters was photographed in Richfield on Wednesday January 30, 2013. (Pioneer Press: Richard Marshall) (Richard Marshall)

"They're trying to get as lean as possible, so (expenses) are more fitted for the kind of sale and profitability level that they have," Brennan said.

Best Buy no longer discloses how many employees it has at its headquarters, but some have estimated the new headcount about 4,000. Best Buy will confirm only that it has 8,000 employees in its home state of Minnesota; that number includes store employees.

No "Blue Shirt" store employees are being laid off in this round, nor are any more stores being closed, the company said.

Last year, the company closed 50 big-box stores, including six in Minnesota. Hundreds of store and corporate layoffs occurred at that time.

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Tuesday's layoffs follow a pledge that Best Buy's new chief executive officer, Hubert Joly, made in November at an investors meeting in New York. Joly promised a leaner operation, vowing to remove $725 million in annual costs.

The company said it will provide more details Friday, when it announces fourth-quarter earnings.

That earnings release, originally scheduled for Thursday, is being delayed in order to avoid Thursday's deadline for company founder and former chairman Richard Schulze to declare whether he'll mount a takeover bid to take Best Buy private.

Schulze, who is Best Buy's largest shareholder, has been trying to assemble a financial team to retake the company he led for decades.

It was under Schulze that Best Buy moved into its Richfield corporate headquarters in 2003, a heady era when business for the electronics retailer was booming.

At that time, the company was growing so quickly that it moved some 5,500 employees to the campus at the intersection of interstates 494 and 35W -- with space for an additional 2,000 future workers.

But times have changed.

The rise of the Internet -- and online-only retailers such as Amazon.com -- has undercut the appeal and pricing of Best Buy's big-box stores. In addition, discount chains such as Wal-Mart and Target have expanded into consumer electronics and manufacturers-turned-retailers such as Apple have emerged as a challenge. Recently, Best Buy extended a price-matching initiative to counter this new retail competition.

Brennan, the St. Thomas retail specialist, said Best Buy's true mission will be to expand the company, not keep slashing away.

Here, Brennan sees positive signs under its new leadership team. But he is concerned about the long-term future for one of Minnesota's entrepreneurial success stories, a company Schulze started in 1966 as a single stereo shop in St. Paul that grew to become the world's largest electronics chain.

"The customer experience in the store is still not where it used to be," Brennan said. Nor is the online operation best-of-class, he added.
In November, Joly traveled to Wall Street and challenged the sour conventional wisdom about Best Buy's business model.

"There is nothing structurally wrong" with Best Buy's business, he told analysts. "For some reason, we took our eye off the ball and failed to focus on execution and innovation."

Joly argued that Best Buy's problems are fixable, and his team is passionate about fixing them.

But that view drew some push-back. One analyst said he was "a little bit dismayed about your lack of introspection" about changing times and altered shopping patterns.

Besides the external and changing retail challenges, Best Buy has faced internal turmoil as well. In the past year, nearly the entire team of top executives has been replaced, Schulze included, after the disclosure of an inappropriate relationship between a young Best Buy employee and then-CEO Brian Dunn, who resigned last spring.

Schulze soon stepped down as chairman and began working on a buyout deal. Joly, a former top executive at Carlson Cos., was named CEO in August.

All this tumult sent Best Buy's stock plunging in 2012, although it has snapped back more than 40 percent in 2013. On Tuesday, shares closed down 3.2 percent, or 54 cents, to $16.46.

Tom Webb can be reached at 651-228-5428. Follow him at twitter.com/TomWebbMN.

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